NISHIKAWA RUBBER CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥57.35B
• Operating Income: ¥3.98B
• Net Income: ¥2.44B
• EPS: ¥111.85

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Nishikawa Rubber (5161) reported FY2026 Q2 consolidated results under JGAAP showing topline softness but resilient profitability and solid cash generation. Revenue declined 6.3% YoY to 57,349 million yen, reflecting weaker volumes and/or pricing pressure likely tied to auto production adjustments and FX normalization. Despite the revenue contraction, operating income slipped only 3.0% YoY to 3,979 million yen, indicating disciplined cost control and some operating leverage resilience. Ordinary income of 4,736 million yen exceeded operating income by 757 million yen, implying net non-operating gains that offset interest expense of 345 million yen. Net income surged 105.1% YoY to 4,289 million yen, a sharp improvement relative to operating trends, suggesting contributions from non-operating items and potentially lower effective tax pressure versus the prior year. Gross margin stood at 19.2%, EBITDA margin at 11.7%, and operating margin at approximately 6.9%, highlighting a modest-margin profile typical for automotive rubber components with incremental efficiency improvements. DuPont analysis yields a calculated ROE of 4.98%, driven by a 7.48% net margin, 0.409x asset turnover, and 1.63x financial leverage; the ROE is adequate but below what many investors consider value-creating thresholds. Liquidity is strong with a current ratio of 254.4% and working capital of 46,196 million yen, which should comfortably support ongoing operations. The debt-to-equity ratio of 0.54x points to a conservative balance sheet, and interest coverage at 11.5x indicates manageable financing cost burden. Operating cash flow was 4,190 million yen, nearly matching net income (OCF/NI 0.98), signaling solid earnings quality for the period. Investing cash flow and cash balance were not disclosed in the data provided, so free cash flow could not be determined from this set; reported zeros are placeholders for undisclosed items. Dividend per share is shown as 0.00 with a 0% payout ratio, consistent with a conservative capital return stance near term, though this may reflect timing or data gaps as share information is also undisclosed. The equity ratio is shown as 0.0% but should be treated as undisclosed rather than an actual value, given equity of 86,174 million yen against total assets of 140,315 million yen. Overall, the company is navigating demand volatility with decent margin preservation, strong liquidity, and healthy cash conversion. The key watchpoints are sustainability of non-operating gains, recovery in revenue momentum, and clarity on capex and cash balances to assess through-cycle free cash flow. Data limitations around cash, inventories, and investing flows constrain depth of analysis, but available figures indicate stable fundamentals and improved bottom-line performance.

Profitability Analysis

ROE is 4.98% via DuPont: net profit margin 7.48% x asset turnover 0.409 x financial leverage 1.63. The margin outperformance versus operating margin (~6.9%) reflects positive non-operating balance this period. Gross margin at 19.2% is modest but consistent with auto parts suppliers; cost discipline is evident as operating income fell less than revenue (-3.0% vs -6.3%). EBITDA of 6,729 million yen and an 11.7% margin show a reasonable buffer for fixed costs; interest coverage at 11.5x underscores solid operating earnings relative to financing costs. Ordinary income of 4,736 million yen versus operating income of 3,979 million yen implies net non-operating gains of roughly 757 million yen, likely FX or investment income offsetting 345 million yen of interest expense. The effective tax rate calculated from provided figures appears around the low-to-mid 20s (income tax of 1,301 million yen versus implied pre-tax near 5.6 billion yen), although a metric of 0.0% was listed due to disclosure mismatch. Overall profitability is steady with some reliance on non-operating items; operating leverage is moderate, evidenced by a less-than-proportional decline in operating income relative to revenue.

Growth Assessment

Revenue decreased 6.3% YoY to 57,349 million yen, suggesting softer demand or price/mix headwinds, likely tied to automotive production schedules or FX normalization. Operating income declined 3.0% YoY to 3,979 million yen, a better outcome than revenue, indicating cost controls and potentially improved product mix. Net income more than doubled (+105.1% YoY) to 4,289 million yen, largely driven by non-operating gains and/or a more favorable tax environment versus the prior year. The net margin at 7.48% outpaces the operating margin, reinforcing the role of non-operating items this period. Sustainability of earnings growth will depend on normalization of non-operating contributions, stabilization of OEM production, and ability to pass through input cost changes. With asset turnover at 0.409x, topline acceleration is important for ROE expansion given a relatively conservative leverage posture. No guidance was provided in the data, but near-term outlook hinges on global auto demand, energy and material cost trends, and FX movements. Absent investing cash flow disclosure, we cannot assess growth capex intensity; clarity on capex would inform medium-term capacity and margin trajectory.

Financial Health

Total assets are 140,315 million yen with equity of 86,174 million yen and liabilities of 46,679 million yen, indicating a solid equity buffer; the reported equity ratio of 0.0% should be viewed as undisclosed. The debt-to-equity ratio is 0.54x, consistent with moderate leverage. Liquidity appears strong: current assets of 76,120 million yen versus current liabilities of 29,924 million yen yield a current ratio of 254.4% and working capital of 46,196 million yen. The quick ratio is shown equal to the current ratio due to undisclosed inventories; this should be interpreted cautiously. Interest expense is 345 million yen with interest coverage at 11.5x, implying low refinancing risk and adequate cushion against rate increases. Financing cash flow was -2,154 million yen, likely reflecting debt repayment or other financing uses; dividends appear undisclosed or zero in this dataset.

Cash Flow Quality

Operating cash flow was 4,190 million yen versus net income of 4,289 million yen, producing an OCF/NI ratio of 0.98, which indicates high earnings quality for the period. EBITDA of 6,729 million yen provides a cash flow foundation, and interest obligations of 345 million yen are well covered. Investing cash flow is undisclosed (reported as zero), preventing a reliable free cash flow calculation; the provided FCF of 0 should be treated as not available. Working capital details are incomplete due to inventories being undisclosed; nonetheless, strong current assets relative to current liabilities suggest no acute working capital strain. Without capex disclosure, we cannot evaluate maintenance versus growth investment mix, which is important for assessing sustainable free cash flow.

Dividend Sustainability

Annual DPS is shown as 0.00 and payout ratio as 0.0%, which should be treated as undisclosed or not paid in the period rather than a definitive policy statement given missing share information. With OCF of 4,190 million yen and moderate leverage, the company appears to have capacity for shareholder returns, but the absence of investing CF data and FCF prevents coverage analysis; the listed FCF coverage of 0.00x is not meaningful. Near-term dividend sustainability thus cannot be conclusively assessed from this dataset; policy likely remains conservative until revenue momentum and free cash flow visibility improve.

Risk Assessment

Business Risks:

• Demand volatility tied to global automotive production cycles and OEM schedules
• Raw material price fluctuations (synthetic/natural rubber, petrochemicals) and energy costs
• FX movements affecting both revenue translation and input costs
• Customer concentration with major automakers and pricing pressure in supply chain negotiations
• Product mix shifts due to EV transition potentially impacting certain rubber components
• Operational execution across overseas subsidiaries and supply chain disruptions

Financial Risks:

• Reliance on non-operating gains to lift net margin above operating margin
• Potential interest rate increases impacting financing costs, though coverage is currently strong
• Limited visibility on capex and investing cash flows constrains free cash flow assessment
• Working capital swings (receivables/payables/inventories) not fully observable due to undisclosed items

Key Concerns:

• Sustainability of net income strength given ordinary vs operating income gap
• Topline contraction (-6.3% YoY) requiring stabilization for ROE improvement
• Incomplete disclosure on cash, inventories, and investing flows impedes full balance sheet and FCF analysis

Investment Implications

Key Takeaways:

• Revenue down 6.3% YoY but operating profit down only 3.0%, indicating cost control
• Net income up 105.1% YoY, supported by non-operating gains and favorable taxes
• ROE at 4.98% is subdued; improvement requires higher asset turnover and/or margin expansion
• Liquidity is strong (current ratio 254.4%) and leverage moderate (D/E 0.54x)
• OCF/NI at 0.98 suggests solid earnings quality
• Capex and cash balances undisclosed, leaving FCF and dividend capacity unclear

Metrics to Watch:

• Revenue trajectory and order trends with key OEM customers
• Operating margin (currently ~6.9%) versus net margin to track non-operating dependence
• OCF/NI conversion and working capital days once inventories are disclosed
• Capex and investing cash flows to assess sustainable free cash flow
• Interest coverage and debt metrics amid rate environment changes
• ROE progression relative to margin and asset turnover changes
• FX impacts on ordinary income and material costs

Relative Positioning: Within domestic auto parts peers, Nishikawa Rubber exhibits conservative leverage and strong liquidity with modest margins and a mid-single-digit ROE; improving topline momentum and clarifying capex/FCF would be key to closing the gap to higher-ROE peers.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis